Smoothness Priors and the Distributed Lag Estimator.
Abstract
Shiller's distributed lag estimator based on a smoothness prior demonstrates the potential of the Bayesian approach to statistical model building. Nevertheless, when the number of significant lag coefficients is small the assumption of smoothness of the pattern of the lag coefficients may not be appropriate. In this paper, to cover such a situation, the smoothness is assumed for the behavior of the coefficients viewed in the frequency domain. This definition leads to a smoothness prior with a particularly simple form. Numerical result shows that the estimator based on this smoothness prior produces good estimates of the lag coefficients where Shiller's prior produces highly biased estimates. It is also observed that the new estimator produces reasonable results even when the Shiller's prior is more appropriate. The danger of introducing a bias by assuming a Bayesian model is stressed in the discussion. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Aug 01, 1979
- Accession Number
- ADA075574
Entities
People
- Hirotugu Akaike
Organizations
- Stanford University